Haven currencies show virus fears may have peaked

Bloomberg

There are signs that concern in the global foreign exchange market over the deadly coronavirus may be wearing off.
Haven currency the Swiss franc slipped to nearly a three-week low against the dollar on Wednesday, even as the virus spread further. The Japanese yen, another traditional refuge, has failed to gain since Hong Kong initiated travel bans, while the Australian dollar is showing signs of weathering the outbreak.
Currency markets may be looking through headlines which have helped dictate sentiment across other asset classes. The move in the franc in particular indicates some traders have already adjusted their portfolios and are looking toward other risks instead.
Previous outbreaks of deadly diseases suggest currencies may be relatively resilient towards the spread of coronavirus, Nordea Bank said in a research note. While traditional bellwethers of risk appetite such as equities may face a temporary sell-off and bonds gain ground, moves in currencies are likely to be more contained, the bank predicted.
The haven moves may also be linked to speculation that the virus could prove less deadly than some of its predecessors.
“The latest focus seems to have shifted a bit to how the outbreak is progressing,” said Ned Rumpeltin, European head of foreign exchange strategy at Toronto-Dominion Bank in London. “This episode has eclipsed the infection rate of Sars, but there are also some indications that the relative severity of those cases may not be as acute.”
Option markets are now signalling less bearish sentiment on the Australian dollar, a commodity-linked currency influenced by the country’s trade with China. One-week risk reversals, a barometer of positioning and sentiment, rallied in favour of buying the Australian dollar by the most in five months on Wednesday.
Signs are also emerging that the euro could be about to strengthen against the Swiss franc. An indicator of whether the euro is oversold against the franc rebounded from a five-year low on Wednesday. The so-called relative strength index rose above 30, a level seen as signaling a reversal in direction.
On technical charts, a candle pattern on the euro’s spot price against the franc suggested the shared currency could rise.